Here’s the FTSE 100’s ‘logical bottom’

The FTSE this week and a UFO (FTSE:UKX)

Our outlook on Thursday evening was delayed slightly, due to one of our number wandering around in the dark trying to take a photograph of the Milky Way – the sky above his part of Scotland was unusually clear.

Unsurprisingly, he failed to find an entire universe but did see something odd. A high altitude jet or perhaps a satellite suddenly turned right, literally executing a 90 degree turn with no apparent change in speed.

Needless to say, this occurred while awaiting the camera to process a prior snapshot.

A search of Google revealed quite a few folk commenting on this unexplained phenomena, spotted in various parts of the world over the years. Sometimes, it seems a moving star changes direction, usually blamed on a helicopter or more recently, a drone by “experts”. We choose to label it “unidentified”.

Our reason for bringing this up relates to similar “experts” who write about stockmarkets.

How often do we read nonsense like “FTSE Recovers as sterling slips, due to XYZ fears”. The plain unvarnished truth is of a journalist trying to find a convincing reason to explain the inexplicable.

Amusingly, one newspaper attempted to explain a FTSE movement on the UK prime minister’s speech in Florence, the headline writer neatly ignoring the complaint being her speech didn’t actually say anything. However…

The FTSE 100 (UKX) closed the week in relatively benign territory and movements now above 7,337 should prove capable of growth in the coming days toward a fairly useless 7,383 points.

As the solid blue line on the chart implies, this hints of a challenge against the immediate downtrend during the week and, ideally, should the market better this level around Thursday, substantial hope appears possible for a break upward toward 7,475 points.

Visually, this would return the index to the trading range prior to North Korea apparently throwing a scare. Perhaps more importantly, achieving 7,475 also has the potential of a break in the dashed blue line, which is needed to negate some grotty news.

Currently, the FTSE is trading in a region with a logical bottom of 7,025 points, this being a point where we’d tend to expect a bounce.

Certainly, if this level appears, a quick long position with a blooming tight stop makes a lot of sense. The implication if the 7,025 level breaks, is of continued weakness toward 6,805 points, maybe even 6,630 points if reversal is driven by truly justified grotty-ness!

For now, it appears an attempt is being made to wrest the FTSE from the edge of a trench, but if the market were now to find an excuse to trade below ‘red’ – currently 7,212 points – we’d be quite justifiably alarmed. And we need not invent reasons for a drop either…

Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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